Justin Sun accuses WLFI of hidden token freeze backdoor

Justin Sun has accused World Liberty Financial, or WLFI, of hiding controls that could freeze token holders’ wallets.

The claims add new pressure to the project as onchain activity, borrowing patterns, and token losses draw more attention.

Sun said he backed WLFI because it presented itself as a decentralized finance platform built to expand financial access. He wrote that the project later revealed a very different structure, one that gave the company direct control over token holders’ access.

In his statement, Sun claimed the WLFI smart contract contained a “backdoor blacklisting function.” He said that feature could let the company “freeze, restrict, and effectively confiscate” assets without notice or recourse. No response from WLFI was included in the material provided.

Sun said he was “the first and single largest victim” of the alleged blacklist system. He claimed WLFI blocked his wallet in 2025 and said the action violated investor rights and basic blockchain standards tied to fairness and transparency.

He also challenged the project’s governance process. Sun said votes used to support these actions were not fair or transparent. He argued that key facts were withheld from voters and that participation was limited before outcomes were decided.

Moreover, the dispute comes as WLFI also faces questions over its use of self-issued assets in lending activity. The project committed large amounts of its own tokens and stablecoin to secure outside liquidity.

Blockchain data cited in the report showed that WLFI used around $14 million in USD1 to borrow about $11.4 million in USDC in February. Other reported transfers and deposits later pushed total borrowing above $75 million, while the project’s presence on Dolomite grew to a large share of the protocol’s liquidity.

Price pressure adds to the dispute

Market data in the same report showed WLFI falling more than 21% over the past 30 days. The token traded below $0.08 as the accusations circulated and as concerns around liquidity use and withdrawals stayed in focus.

The report also said USD1 pool utilization neared 93% and that WLFI moved 3 billion tokens in early April. Sun said the project should “unlock the tokens and uphold transparency” as pressure around the platform continues to build.